(Adds comments on improving the fed funds rate)
July 11 The Federal Reserve could well let
inflation rise to 2.4 percent or so, above its 2-percent target,
if the economy requires it, a top U.S. central banker said.
Chicago Fed President Charles Evans, in an interview with
Bloomberg TV on Thursday, said it would not be a "catastrophe"
to overshoot inflation by some amount.
"Even a 2.4 percent inflation rate, if it's reasonably well
controlled and the rest of the economy is doing OK and policy is
being adjusted to keep that under the 2.4 percent range, I think
that could work out," Evans said.
The policymaker added he expects 1.5 to 1.75 percent
inflation over the next couple of years, and said the U.S. labor
market is doing "a lot better" recently.
Given better economic data, the Fed is expected to wind down
its bond-buying stimulus in October and to raise its key federal
funds rate from near zero in about a year. Evans, a dovish Fed
policymaker, said, for him, it would however be appropriate to
wait until early 2016 to tighten.
Turning to the mechanics of how to raise rates after years
of aggressive easing without destabilizing markets, Evans said
the Fed is mulling ways to improve the accuracy of its fed funds
Minutes from the Fed's June policy-setting meeting, released
this week, revealed officials considered ways to recalculate the
rate "in order to obtain a more robust measure of overnight bank
funding rates and to apply lessons from international efforts to
develop improved standards for benchmark interest rates."
In the TV interview, Evans said: "The number of participants
that form the basis for how the effective fed funds rate is
calculated is much smaller than everybody who trades in the fed
"There are other sources of data that we are going to have
access to which could give rise to a firmer estimate of that."
(Reporting by Jonathan Spicer; Editing by James Dalgleish and